Centralized and decentralized power

By Robert Vogl and Sonia VoglPresident and Vice President,
Illinois Renewable Energy Association

For the last hundred years we have been served by centralized power systems which relied on fossil fuels. Instead of paying the full cost of the energy, pollution and harmful health effects were ignored or absorbed by affected people and ecosystems. When ignored costs are added to government subsidies, total supports for fossil fuels are substantial.

A paper produced by the International Monetary Fund, How Large Are Global Energy Subsidies? estimates the total costs amount to $5.6 trillion. The paper challenges the business as usual approach while identifying the massive costs associated with our energy use.

A reaction to the distorted energy market has led to a push to move toward a cleaner energy system based on efficiency and renewable forms of energy. Getting energy prices right would be a further stimulus for investments in renewable energy, but even without eliminating market distortions the new energy technologies are increasingly cost effective. As a result they are gaining market share.

As they gain acceptance, a battle that was settled a hundred years ago has re-emerged. It revolves around the question of whether the public and the economy are better served by centralized or decentralized energy systems.

John Farrell reported on the Institute for Local Self-Reliance’s vision of a cleaner energy system. They believe local economies will benefit from making a transition to 100 percent local energy but identify large, powerful, well financed economic interests as resisting such a transition.

Other solar advocates are attempting to reduce the dominance of centralized and corporate controlled electrical service. Many seek the right to generate their own rooftop solar electricity to gain a measure of energy independence and decrease their contribution to climate change. They remain grid connected but anticipate a time when electrical storage will create an opportunity for them to disconnect.

An interesting battle is playing out in Nevada between NV Energy and advocates of rooftop solar. Berkshire Hathaway is heavily invested in wind and solar energy but recently purchased NV Energy which is battling rooftop solar providers over net metering. The cumulative capacity of all net metering installations in the state is capped at 3 percent of the total capacity of all the state’s electrical utilities.

In 2014, the number of participants in Nevada’s PV program doubled. As rooftop solar installations increase, NV Energy’s earnings diminish. The cap is seen as limiting the market for rooftop solar: installers want to raise the cap to 10 percent while the utility wants to keep it at 3 percent. Some interests see the utility’s action as trying to protect their monopoly by eliminating their competition. The issue is settled for this year, but the state’s public utilities commission remains empowered to set a new rate structure for solar.

According to David Mazor, who writes on Berkshire Hathaway, several casinos have filed letters of intent to leave Nevada Power and seek service from another qualified energy provider. Leaving could cost the casinos over $27 million.

Now that decentralized energy sources such as wind and solar are cost competitive with centralized sources of electricity what will be the future role of centralized generation? The competition over who gets the economic benefits of using solar energy is intensifying and serves as further proof of its viability as an energy source.